Question

Consolidation subsequent to date of acquisition - Equity method with noncontrolling interest and AAP
Assume that, on January 1, 2009, a parent company acquired an 80% interest in its subsidiary. The total fair value of the controlling and noncontrolling interests was $500,000 over the book value of the subsidiary’s Stockholders’ Equity on the acquisition date. The parent assigned the excess to the following [A] assets:

[A] Asset Initial Fair Value Useful Life (years)

[A] Asset	Initial Fair Value	Useful Life (years)
Property, plant and equipment (PPE), net	$100,000	10
Customer list	150,000	10
Goodwill	250,000	Indefinite
	$500,000

80% of the Goodwill is allocated to the parent. The parent and the subsidiary report the following financial statements at December 31, 2013:

	Parent	Subsidiary			Parent	Subsidiary
Income statement:				Balance sheet:
Sales	$7,330,000	$1,870,500		Assets
Cost of goods sold	(5,131,000)	(1,122,300)		Cash	$411,313	$131,511
Gross profit	2,199,000	748,200		Accounts receivable	938,240	433,956
Income (loss) from subsidiary	189,496			Inventory	1,422,020	557,409
Operating expenses	(1,392,700)	(486,330)		Equity investment	1,475,671
Net income	$995,796	261,870		Property, plant and equipment (PPE), net	5,374,356	1,280,669
					$9,621,600	$2,403,545
Statement of retained earnings:
BOY retained earnings	$3,682,592	$966,425		Liabilities and stockholders’ equity
Net income	995,796	261,870		Current liabilities	$1,053,321	$433,956
Dividends	(199,159)	(39,281)		Long-term liabilities	2,000,000	500,000
EOY retained earnings	$4,479,229	$1,189,014		Common stock	1,198,455	124,700
				APIC	890,595	155,875
				Retained earnings	4,479,229	1,189,014
					$9,621,600	$2,403,545

d. Reconstruct the activity in the parent’s pre-consolidation Equity Investment T-account for the year of consolidation.

Round answers to the nearest whole number.

Equity Investment
Balance at 1/1/13	Answer	Answer
AnswerNet incomeDividendsAAP amortization	Answer	Answer	Dividends
	Answer	Answer	AnswerNet incomeDividendsAAP amortization
Balance at 12/31/13	Answer	Answer

e. Independently compute the owners’ equity attributable to the noncontrolling interest beginning and ending balances starting with the owners’ equity of the subsidiary.
Round answers to the nearest whole number.

Noncontrolling interest at 1/1/13:
Common stock	Answer
APIC	Answer
Retained earnings	Answer
AnswerCommon stockAPICRetained earningsUnamortized AAP	Answer
	Answer
Noncontrolling interest at 12/31/13:
Common stock	Answer
APIC	Answer
Retained earnings	Answer
AnswerCommon stockAPICRetained earningsUnamortized AAP	Answer
	Answer

f. Independently calculate consolidated net income, controlling interest net income and noncontrolling interest net income.

Round answers to the nearest whole number. Use negative signs with answers that are deductions.

Consolidated:
Parent's stand-alone net income		Answer
Subsidiary's stand-alone net income		Answer
Less:	Answer100% AAP amortization80% AAP amortization20% AAP amortization	Answer
Subsidiary's adjusted stand-alone net income		Answer
Consolidated net income		Answer
Parent:
Parent's stand-alone net income		Answer
Subsidiary's stand-alone net income		Answer
Less:	Answer100% AAP amortization80% AAP amortization20% AAP amortization	Answer
>80% of subsidiary's stand-alone net income		Answer
Consolidated net income attributable to the parent		Answer
Subsidiary:
20% of subsidiary's stand-alone net income		Answer
Less:	Answer100% AAP amortization80% AAP amortization20% AAP amortization	Answer
		Answer

Answer 1

ANSWER:

100% AAP Amortization And Carrying Value Amortization per year (A/B) Intial Value Life operty,Plant and Equipment (PPE),net Customer List Goodwill 100,000 150,000 10 1.0 1,00 15,000 0,00 enie

Unamortized AAP 01/01/2009Amortization 01/01/2010Amortization 01/01/2011 Amortization 01/01/2012 Amortization 01/01/2013 Amortization 12/31/2013 Unamortized AAP Unamortized AAP Unamortized AAP Unamortized AAP Unamortized AAP 加,リ 2010 2011 2013 100% property, Plant and Equipment (PPE).net Customer List Goodwill Total ,00010000 80,000 10,000 135,000 70,000 105,000 250,000 425,000 10,000 15,000 10,000 15,000 100,000 150,000 250,000 500,000 60,000 90,000 250,000 400,000 50,000 75,000 250,000 375,000 15,000 120,000 15,000 15,000 25,000 475,000 25,000 450,000 25,000 25,000 25,000 48,000 72,000 30,000 120,000 200,000 400,000 8,000 72,000 108,000 200,000 380,000 8,000 64,000 8,000 56,000 8,000 Cu 12,000 96,000 1 12,000 84,000 12,000 er List 12,000 200,000 Total 20,000 20,000 360,000 20,000 20,000 320,000 20,000 300,000 20% Property Plant and Equipment (PPE) net 2,000 3,000 14,000 21,000 50,000 85,000 12,000 18,000 50,000 80,000 20,000 30,000 50,000 100,000 18,000 27,000 50,000 95,000 16,000 24,000 50,000 90,000 2,000 3,000 10,000 15,000 50,000 2,000 Customer Lis Goodwill Total 3,000 3.000 5,000 5,000 5,000 5,000 5,000

Pre-Consoldiation Equity Balance Equity Investment at 1/1/13: Common Stock (124,700 x 80%) APIC (155,875 x 80%) Retained Earnings (966,425 x 80%) Unamortized AAP 99,760 124,700 773,140 320,000 1,317,600 Equity Investment at 12/31/13: Common Stock (124,700 x 80%) APIC (155,875 x 80%) Retained Earnings (1,189,014 x 80%) Unamortized AAP 99,760 124,700 951,211 300,000 1,475,671